Legal & Regulatory
Central Bank Increases ATM Cash Withdrawal Limit
India’s central bank the Reserve Bank of India (RBI) on December 30 raised the daily ATM withdrawal limit to US$65 (Rs 4,500) from January 1, from the earlier limit of US$36 (Rs 2,500) per day. The weekly limit of US$351 (Rs 24,000) remains the same; for traders the limit is US$732 (Rs 50,000) per week. The development comes after the RBI stated that there should be enough currency notes in circulation following the surprise demonetization of the US$7 (Rs 500) and US$14 (Rs 1000) rupee notes on November 8. While the increase in withdrawal limit is welcome, most ATMs still do not have enough cash, particularly in big cities like Delhi, Mumbai, Kolkata, Chennai and Bangalore. A report by a leading newspaper stated that only 40 percent of the 220,000 ATMs in the country. Other reports say that the situation will fully normalize by March. Analysts have questioned the regulation saying that the increase in cash withdrawal might make the situation worse as the new currency is still not enough to meet demand.
By Dezan Shira & Associates
Editor’s Note: The article was first published in August 2013 has been updated as of December 29, 2016 to incorporate the latest changes.
In India, the permanent account number (PAN) is a ten character alphanumeric code combination allotted by the Indian Income Tax Authorities to individuals and registered entities. The PAN’s key function is as an all-in-one form of identification, but it also acts as a factor for all financial transactions; thereby maintaining a track-record of an individual’s financial transactions. Through this, PANs help in avoiding tax evasion and also support compliance of applicable laws.
All foreign directors or responsible persons engaged by the Indian subsidiary of a foreign-invested business must register for a PAN if they wish to operate their company accounts, regardless of whether they are based in India or not.
Ongoing RCEP Negotiations – India Offers China Tariff Concessions on Over 70% Goods
Under the ongoing negotiations for a Regional Comprehensive Economic Partnership (RCEP) agreement, India is proposing to offer tariff elimination on over 70 percent of goods from China. In addition, India has offered the highest level of tariff elimination to the member countries of the Association of Southeast Asian Nations (ASEAN) during a bilateral meeting in Indonesia.
To protect its domestic industries, such as steel, the Indian government will extend the tariff elimination period by up to 30 years. Other member countries to the RCEP want shorter adjustment periods. However, India is committed to a longer phasing out period, having forgone its proposed three-tier tariff concession system at the Laos Ministerial session in August. India’s next big concern is with regards to negotiations on the services agreement.
By Pritesh Samuel
The government on December 14 cleared the Major Port Authorities Bill, 2016, which replaces the Major Port Trusts Act, 1963. The new bill is expected to give more autonomy and flexibility to ports in the country. The bill will help in faster and transparent decision making as it reorients the government model in central ports to the landlord port model which is in line with global practices.
Landlord Port Model
In the landlord port model, the port authority acts as a regulatory body and the landlord, with private companies carrying out port operations, mainly in cargo handling activities. The port authority maintains ownership of the port, while the infrastructure is leased to private companies that maintain their own buildings and install their own equipment to handle cargo. The port authority in turn gets a portion of the revenue from the private enterprises. As per the new bill, port authorities will be able to lease land for port activities for up to 40 years and for non-port activities up to 20 years. For longer leases, government approval will be needed.
New Income Tax Reporting Rules to Curb Unaccounted Cash
The Central Board of Direct Taxes (CBDT) recently amended certain income tax rules to track the money deposited into bank and post office accounts post the government’s move to demonetize high-value currency. The CBDT has modified Rule 114E of the Income-tax Rules, 1962, under which specified persons under section 285BA of the Income-tax Act, 1961, have to report high-value financial transactions. These specified persons include banks, mutual funds, institutions issuing bonds, and registrars or sub-registrars. They are required to file the Annual Information Report (AIR), containing the details of their high-value transactions, by May 31 of the following year.
By Melissa Cyrill
India’s Ministry of Corporate Affairs (MCA) recently introduced the SPICe Form INC-32, which stands for Simplified Proforma for Incorporating Company Electronically. The new form follows from the 2015 merger of securing allotment of the Director Identification Number (DIN), name approval, and incorporation application within a single process through Form INC-29 (under the amended Companies Act, 2013). In October this year, the MCA took a step further and established the ‘Companies (Incorporation) Fourth Amendment Rules, 2016’ to facilitate this integration via the electronic format through the SPICe Form INC-32, the e-Memorandum of Association (eMOA) in Form INC-33, and the e-Articles of Association (eAOA) in Form INC-34, besides few other changes.
With the latest amendments, the government will be able to provide and regulate fast and efficient incorporation services within stipulated time frames, in line with international best practices.
Latest Government Updates on Implementation of High-Value Rupee Demonetization
Banks in India are reeling from the real-time spate of announcements made by the government to manage the incredible scale of logistics involved in the sudden demonetization of the 500 and 1000 Rupee notes. In the latest notifications announced, the government directed banks to use indelible ink to mark customers exchanging the defunct currency, introduced new caps on amounts that can be exchanged – first increasing it to US$ 65.99 (Rs 4500) from US$ 58.66 (Rs 4000), and subsequently, reducing it to US$ 29.33 (Rs 2000) before putting a temporary moratorium on the exchange, before reverting to the US$ 29.33 (Rs 2000) limit. However, in terms of expanding points-of-sale (PoS), petrol pumps will now offer cash withdrawal services (via card swipe machines) for maximum limit of Rs 2000 (US$ 29.33). Initially, this will be available at 2,500 petrol pumps (gas stations) across the country that have card swipe machines from State Bank of India, which will then be extended to 20,000 outlets that have card swipe machines from HDFC Bank, Citibank and ICICI Bank. Currently, about a third of India’s 202,000 ATMs have been upgraded to dispense the new Rs 2000 and Rs 500 notes.
By Pritesh Samuel
In a surprise move, the Narendra Modi government announced on the night of November 8 that the existing US$ 7.5 (Rs 500) and US$ 15 (Rs 1,000) currency notes will be withdrawn from public use from the following midnight. The move is the government’s boldest step yet to curb the circulation of black money and counterfeit currency as well as control inflation. Only twice before, first in 1946 (a year prior to independence) and then in 1978, has the government taken such a decision to demonetize high value currency.
As soon as the announcement was made on Tuesday night, long queues were seen at ATMs and banks to either withdraw US$ 1.5 (Rs 100) denominations or deposit the 500 and 1000 rupee denominations. All banks and ATMS will be closed on November 9 to replace the older denominations. Banks are expected to re-open on November 10 while ATMs are expected to commence limited operations from the same day itself.
To alleviate inconvenience in the near term, airline ticketing counters, government hospitals, pharmacies, and railway reservation counters will accept the old currency notes until November 11. The older currency denominations can be exchanged or deposited at banks until December 30.